-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GhqVshlWcbAmzdk2M+CG2CFWyeTVuqj4FHAyOJRzu5m56dtJFu3W85MQuwnnDmGS jDbm6PI3ZOdOLx+6/26XUg== 0000051410-95-000002.txt : 19950509 0000051410-95-000002.hdr.sgml : 19950508 ACCESSION NUMBER: 0000051410-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950112 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL MULTIFOODS CORP CENTRAL INDEX KEY: 0000051410 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 410871880 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06699 FILM NUMBER: 95501178 BUSINESS ADDRESS: STREET 1: 33 S SIXTH ST STREET 2: P O BOX 2942 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-0942 BUSINESS PHONE: 6123403300 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL MILLING CO INC DATE OF NAME CHANGE: 19700217 10-Q 1 3RD QTR 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-6699 INTERNATIONAL MULTIFOODS CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 41-0871880 (I.R.S. Employer Identification No.) 33 South Sixth Street, Minneapolis, Minnesota 55402 (Address of principal executive offices) (Zip Code) (612) 340-3300 (Registrant's telephone number, including area code) (not applicable) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the registrant's Common Stock, par value $.10 per share, as of December 31, 1994 was 17,998,514. PART I. FINANCIAL INFORMATION INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Operations (unaudited) (in thousands, except per share amounts) THREE MONTHS ENDED NINE MONTHS ENDED Nov. 30, Nov. 30, Nov. 30, Nov. 30, 1994 1993 1994 1993 Net sales $693,772 $585,626 $1,771,243 $1,662,925 Cost of sales (581,289) (473,806) (1,477,156) (1,351,248) Delivery and distribution (40,750) (37,702) (106,661) (106,959) Selling, general and administrative (50,085) (52,077) (144,824) (151,191) Unusual items - - 26,661 (47,464) Interest, net (3,045) (2,096) (8,827) (7,865) Corporate (413) 337 (1,431) (607) Losses from unconsolidated affiliates - - - (12,187) Earnings (loss) before income taxes 18,190 20,282 59,005 (14,596) Income taxes (7,276) (7,829) (13,694) 6,261 Net earnings (loss) $10,914 $ 12,453 $ 45,311 $ (8,335) Net earnings (loss) per share of common stock $ .61 $ .66 $ 2.51 $ (.44) Average shares of common stock outstanding 17,924 18,830 17,979 19,116 Dividends per share of common stock: Declared* $ .20 $ .20 $ .40 $ .60 Paid $ .20 $ .20 $ .60 $ .60 *The Company announced in May 1994 that future declaration dates for dividends would be changed to correspond to the regularly scheduled meeting of the Board of Directors closest to the dividend record date. Accordingly, no dividend was declared in the second quarter of fiscal 1995. This change will not affect any dividend record dates or payment dates. See accompanying notes to consolidated condensed financial statements. INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (dollars in thousands) Condensed from audited financial (Unaudited) statements Nov. 30, February 28, 1994 1994 Assets Current assets: Cash and equivalents $ 8,848 $ 10,507 Trade accounts receivable, net 148,769 146,455 Inventories 263,146 219,630 Other current assets 77,700 62,698 Total current assets 498,463 439,290 Property, plant and equipment, net 228,704 245,891 Goodwill 110,604 72,672 Other assets 41,327 56,922 Total assets $879,098 $814,775 Liabilities and Shareholders' Equity Current liabilities: Notes payable $ 59,268 $ 58,651 Current portion of long-term debt 11,102 3,953 Accounts payable 176,752 150,221 Other current liabilities 112,276 88,909 Total current liabilities 359,398 301,734 Long-term debt, net of current portion 178,653 195,125 Employee benefits and other liabilities 55,006 64,277 Total liabilities 593,057 561,136 Redeemable preferred stock 3,616 3,635 Shareholders' equity 282,425 250,004 Commitments and contingencies Total liabilities and shareholders' equity $879,098 $814,775 See accompanying notes to consolidated condensed financial statements. INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (unaudited) (dollars in thousands) NINE MONTHS ENDED Nov. 30, Nov. 30, 1994 1993 Cash flows from operations: Net earnings (loss) $ 45,311 $(8,335) Adjustments to reconcile net earnings (loss) to cash provided by operations: Depreciation and amortization 19,728 22,396 Deferred income tax benefit (8,243) (8,127) Provision for losses on receivables 2,351 1,992 Provision for unusual charges 6,220 47,464 Gain on sale of business (32,881) - Equity in losses of unconsolidated affiliates - 12,187 Changes in operating assets and liabilities, net of business acquisitions and dispositions: Accounts receivable (4,156) (5,758) Inventories (53,448) (45,133) Other current assets (17,222) (4,496) Accounts payable 25,799 4,660 Other current liabilities 12,326 238 Other, net 5,117 (1,865) Cash provided by operations 902 15,223 Cash flows from investing activities: Business acquisitions (115,847) (18,476) Capital expenditures (24,001) (36,902) Proceeds from business dispositions 156,367 4,862 Proceeds from other property disposals 2,727 379 Cash provided by (used for) investing activities 19,246 (50,137) Cash flows from financing activities: Net increase in notes payable 4,559 56,765 Net increase (decrease) in long-term debt (6,987) 7,330 Dividends paid (10,950) (11,715) Proceeds from issuance of common stock 119 1,183 Purchase of treasury shares (5,777) (24,935) Other, net (13) (84) Cash provided by (used for) financing activities (19,049) 28,544 Effect of exchange rate changes on cash and equivalents (2,758) (1,121) Net decrease in cash and equivalents (1,659) (7,491) Cash and equivalents at beginning of period 10,507 11,044 Cash and equivalents at end of period $ 8,848 $ 3,553 See accompanying notes to consolidated condensed financial statements. INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements (unaudited) (1) In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments, except as noted elsewhere in the notes to the consolidated condensed financial statements) necessary to present fairly its financial position as of November 30, 1994 and the results of its operations for the three and nine months ended November 30, 1994 and 1993, and cash flows for the nine months ended November 30, 1994 and 1993. These statements are condensed and therefore do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain reclassifications have been made in the accompanying consolidated condensed financial statements in order to conform with fiscal 1995 presentation. The statements should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended February 28, 1994. The results of operations for the three and nine months ended November 30, 1994 are not necessarily indicative of the results to be expected for the full year. (2) Cost of sales - To more closely match costs with related revenues, the Company classifies the inflation element inherent in interest rates on Venezuelan local currency borrowings and the foreign exchange gains and losses, which occur on certain Venezuelan borrowings, as a component of cost of sales. Accordingly, a reduction of $1,665,000 and an increase of $2,470,000 for the nine months ended November 30, 1994 and 1993, respectively, and increases of $235,000 and $1,080,000 for the three months ended November 30, 1994 and 1993, respectively, are included in cost of sales. (3) Businesses acquired - The Company acquired, with cash and notes, certain businesses during fiscal 1995 and 1994. All acquisitions have been accounted for as purchases and, accordingly, the results of operations of the acquired businesses have been included since their respective dates of acquisition. The most significant acquisitions were as follows: Fiscal Business Segment Name Date Acquired 1995 U.S. Foodservice Distribution business August 1994 of Leprino Foods 1994 U.S. Foodservice Bevmatic August 1993 U.S. Foodservice JAMCO June 1993 The components of cash used for all acquisitions, as reflected in the consolidated condensed statements of cash flows, are summarized as follows (in thousands): Nine Months Ended Nov. 30, Nov. 30, 1994 1993 Fair value of current assets, net of cash acquired $ 46,383 $ 4,738 Fair value of non-current assets, excluding goodwill 39,118 12,276 Goodwill 51,478 4,650 Liabilities assumed, principally current (21,132) (688) Purchase contract liabilities - (2,500) Cash paid, net of cash acquired $115,847 $18,476 The following unaudited pro forma financial information assumes the Company's fiscal 1995 acquisition of the specialty foodservice distribution business of Leprino Foods Company had been completed on March 1, 1993, the beginning of fiscal 1994. It includes the financing costs of the acquisition as well as depreciation and amortization associated with the allocation of the purchase price to net tangible and intangible assets acquired. The pro forma information is not necessarily indicative of the combined results of operations that would have occurred had the acquisition been completed as of the beginning of fiscal 1994. Nine Months Ended Nov. 30, Nov. 30, (in thousands, except earnings per share) 1994 1993 Net sales $1,971,000 $1,947,000 Net earnings (loss) 45,686 (8,313) Net earnings (loss) per share of common stock 2.53 (.44) (4) Unusual items - The Company divested its Frozen Specialty Foods business on June 1, 1994 for a pre-tax gain of $32,881,000. The Company recognized a $6,220,000 pre-tax charge for the integration of the recently acquired specialty foodservice distribution business of Leprino Foods Company with the Company's existing pizza and Mexican restaurant distribution business ("Business Integration") in the second quarter of fiscal 1995. The Business Integration charge included $1,100,000 for asset write-downs and $5,120,000 of charges, which consist of $1,400,000 for severance benefits to approximately 125 warehouse, delivery and administrative employees and $3,720,000 primarily for the write-down of lease commitments. The Business Integration is expected to provide benefits of up to $3,000,000 in fiscal 1996 and up to $6,000,000 in fiscal 1997. The following table summarizes the change in the Company's reorganization and integration reserves for the nine months ended November 30, 1994 (in thousands):
U.S. Foodservice Canadian Foods Consoli- Consoli- dation/ Organiza- dation/ Organiza- Closing tional Business Closing tional Total Facilities Changes Integration Facilities Changes Company Reorganization reserves at Feb. 28, 1994 $4,694 $6,109 $ - $2,749 $5,486 $19,038 Reserve additions - - 5,120 - - 5,120 Reserves utilized (2,253) (4,020) (77) (129) (651) (7,130) Exchange rate effect - - - (104) (95) (199) Reorganization and integration reserves at Nov. 30, 1994 $2,441 $2,089 $ 5,043 $2,516 $4,740 $16,829
(5) Interest, net consisted of the following (in thousands): THREE MONTHS ENDED NINE MONTHS ENDED Nov. 30, Nov. 30, Nov. 30, Nov. 30, 1994 1993 1994 1993 Interest expense $4,293 $3,227 $10,937 $9,845 Less: Capitalized interest (87) (420) (256) (593) Non-operating interest income (1,161) (711) (1,854) (1,387) Interest, net $3,045 $2,096 $ 8,827 $7,865 Cash payments for interest, net of amounts capitalized, for the nine months ended November 30, 1994 and 1993 were approximately $10,483,000 and $10,037,000, respectively. Total interest income was $2,610,000 and $1,795,000 for the nine months ended November 30, 1994 and 1993, respectively. (6) Income taxes - Cash payments for income taxes for the nine months ended November 30, 1994 and 1993 were $3,943,000 and $2,024,000, respectively. (7) Supplemental balance sheet information (in thousands) Nov. 30, Feb. 28, 1994 1994 Trade accounts receivable, net: Trade $154,594 $151,642 Allowance for doubtful accounts (5,825) (5,187) Total trade accounts receivable, net $148,769 $146,455 Inventories: Raw materials, excluding grain $ 23,880 $ 27,614 Grain 57,932 41,785 Finished and in-process goods 174,420 141,241 Packages and supplies 6,914 8,990 Total inventories $263,146 $219,630 Property, plant and equipment, net: Land $ 11,747 $ 10,733 Buildings and improvements 86,628 107,741 Machinery and equipment 204,701 213,838 Transportation equipment 9,194 4,678 Improvements in progress 21,219 38,740 Accumulated depreciation (104,785) (129,839) Total property, plant and equipment, net $228,704 $245,891 (8) Financial instruments Concentrations of credit risk - The Company's Venezuelan operations maintain deposits, primarily in local currency, in Venezuelan financial institutions. As of November 30, 1994, these deposits totaled the equivalent of $7,800,000 in U.S. dollars. Due to exchange controls implemented by the Venezuelan government, the Company has experienced delays in converting these deposits to U.S. dollars and, accordingly, paying down U.S. dollar-denominated obligations of its Venezuelan operations. Additionally, the Venezuelan government has assumed control of several local banks due to their respective financial difficulties in order to stabilize the banking system. Other financial instruments - In Canada, the Company minimizes risks associated with wheat market price fluctuations by hedging its wheat and flour inventories, open wheat purchase contracts, and open flour sales contracts with wheat futures contracts. These futures contracts are traded on U.S. exchanges and are denominated in U.S. dollars. Since the inventories, purchase contracts and sales contracts are denominated in Canadian dollars, the Company enters into foreign currency forward contracts which have the effect of converting the U.S. dollar-denominated futures contracts into Canadian dollar equivalents. At November 30, 1994, the Company had entered into wheat futures contracts with maturities that substantially coincided with the maturities of the open wheat purchase contracts and flour sales contracts. These future contracts hedged substantially all of the Company's Canadian wheat and flour inventories and commitments as of November 30, 1994. At November 30, 1994, the foreign currency forward contracts relating to these wheat futures contracts totaled approximately $1,369,000. The U.S. exchanges on which the futures contracts are traded are the counterparties to these transactions. The foreign currency forward contracts are purchased through major Canadian banking institutions which are counterparties to the transactions. In the Company's opinion, the credit risk of these futures and foreign currency forward contracts due to nonperformance of the counterparties is remote. (9) Contingencies - The Internal Revenue Service (IRS) has completed examinations of the U.S. federal income tax returns filed by the Company for the fiscal years ended February 28, 1987 through February 28, 1991. As a result of the examinations, the IRS has issued to the Company a statutory notice of deficiency covering the fiscal years ended February 28, 1987 and February 29, 1988 and a preliminary report covering the fiscal years ended February 28, 1989 through February 28, 1991, both of which are primarily related to the proposed disallowance of certain deductions claimed by the Company in connection with acquisitions. The Company disagrees with the position of the IRS and is pursuing its judicial remedies with respect to fiscal years 1987 and 1988 and its administrative remedies with respect to fiscal years 1989 through 1991. Management believes the final outcome of this matter will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company. (10) Segment information - The Company's business segments are as follows: U.S. Foodservice consists of specialty foodservice distribution and prepared foods operations; Canadian Foods consists of consumer and bakery products operations; and Venezuelan Foods consists of consumer, bakery products and agricultural operations. The Company's divested Frozen Specialty Foods and Meats businesses were included in the U.S. Foodservice business segment. Net Operating (in millions) Sales Costs Total Three Months Ended Nov. 30, 1994 U.S. Foodservice $522.4 $(514.7) $ 7.7 Canadian Foods 90.3 (82.0) 8.3 Venezuelan Foods 81.0 (75.3) 5.7 Total $693.7 $(672.0) $21.7 Segment earnings $21.7 Interest, net (3.0) Corporate unallocated (.5) Earnings before income taxes 18.2 Income taxes (7.3) Net earnings $10.9 Three Months Ended Nov. 30, 1993 U.S. Foodservice $438.2 $(427.9) $10.3 Canadian Foods 82.9 (76.2) 6.7 Venezuelan Foods 64.5 (59.4) 5.1 Total $585.6 $(563.5) $22.1 Segment earnings $22.1 Interest, net (2.1) Corporate unallocated .3 Earnings before income taxes 20.3 Income taxes (7.8) Net earnings $12.5 Net Operating Unusual (in millions) Sales Costs Items Total Nine Months Ended Nov. 30, 1994 U.S. Foodservice $1,321.0 $(1,300.2) $ 26.7 $47.5 Canadian Foods 222.3 (210.1) - 12.2 Venezuelan Foods 227.9 (218.3) - 9.6 Total $1,771.2 $(1,728.6) $ 26.7 $69.3 Segment earnings $69.3 Interest, net (8.8) Corporate unallocated (1.5) Earnings before income taxes 59.0 Income taxes (13.7) Net earnings $45.3 Nine Months Ended Nov. 30, 1993 U.S. Foodservice $1,249.7 $(1,223.5) $(25.7) $ .5 Canadian Foods 216.8 (205.9) (21.8) (10.9) Venezuelan Foods 196.4 (179.9) - 16.5 Total $1,662.9 $(1,609.3) $(47.5) $ 6.1 Segment earnings $ 6.1 Interest, net (7.9) Corporate unallocated (.6) Losses from unconsolidated affiliates (12.2) Loss before income taxes (14.6) Income taxes 6.3 Net loss $(8.3) INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Results of Operations and Financial Condition (Unaudited) Results of Operations: For the third quarter and nine months ended November 30, 1994 compared with the corresponding prior periods. Overview The consolidated net earnings for the third quarter were $10.9 million, or $.61 per share, compared with net earnings of $12.5 million, or $.66 per share, a year ago. Consolidated net sales increased 18% to $693.7 million, compared with $585.6 million, a year ago. Third quarter fiscal 1995 included net sales of the specialty foodservice distribution business of Leprino Foods Company, which was acquired in August 1994. Net sales in fiscal 1994 included the Company's former Frozen Specialty Foods and Meats businesses which were divested in June and May of 1994, respectively. Exclusive of the effect of acquisitions and divestitures, consolidated net sales increased 11%. The consolidated net earnings for the nine months ended November 30, 1994 were $45.3 million, or $2.51 per share, compared with a net loss of $8.3 million, or $.44 per share, a year ago. Fiscal 1995 net earnings included an after-tax gain of $29.6 million, or $1.65 per share, from the divestiture of the Company's Frozen Specialty Foods business and an after- tax charge of $3.7 million, or $.21 per share, for costs associated with the integration of the recently acquired distribution business and the Company's pizza and Mexican restaurant distribution business. The fiscal 1994 net loss resulted from unusual items totaling $36.3 million after-tax related to the reorganization of operations, the loss on the disposition of a bakery distribution business and a charge relating to the decision to divest the Company's minority positions in two Mexican unconsolidated affiliates. Exclusive of unusual items, net earnings were $19.4 million, or $1.07 per share, compared with $28.0 million, or $1.44 per share, a year ago. Consolidated net sales increased 7% to $1.77 billion, compared to $1.66 billion in the year-ago period. Exclusive of the effect of acquisitions and divestitures, consolidated net sales increased 9%. Segment Results U.S. Foodservice third quarter net sales increased 19% to $522.4 million, compared with $438.2 million a year ago. Excluding the effect of acquisitions and divestitures, net sales increased 9% primarily as a result of improved volumes in pizza and Mexican restaurant distribution, bakery, surimi seafood and export products. Volumes benefited from new customers in these businesses. Third quarter segment earnings declined 25% to $7.7 million, compared with $10.3 million in fiscal 1994. Exclusive of the effect of acquisitions and divestitures, segment earnings declined 18%. The decline was primarily the result of costs associated with delays in the implementation timetable of a vending distribution business information system and lower margins in surimi seafood compared with strong margins a year ago, both of which are expected to continue to unfavorably impact segment earnings. U.S. Foodservice segment earnings before unusual items for the nine-month period declined 21% to $20.8 million, compared with $26.2 million a year ago. Segment earnings for the nine-month period were affected by the same factors as noted above for the third quarter. After reflecting unusual items, segment earnings were $47.5 million versus segment earnings of $.5 million a year ago. Fiscal 1995 segment earnings included a $32.9 million pre-tax gain from the divestiture of the Frozen Specialty Foods business and a $6.2 million pre-tax charge for integration of businesses as described above. Fiscal 1994 segment earnings included charges related to reorganization of operations and the loss on the disposal of a bakery distribution business. Net sales for the nine-month period increased 6% to $1.32 billion, compared with $1.25 billion last year. Exclusive of the effect of acquisitions and divestitures, net sales increased 9%. Net sales were affected by the same factors as noted above for the third quarter. In December 1994, the Company announced that it is exploring the divestiture of its surimi seafood operation. Fiscal 1994 net sales of the surimi seafood operation were approximately $60 million. Canadian Foods third quarter net sales increased 9% to $90.3 million, compared with $82.9 million a year earlier. The increase in sales was primarily the result of bakery product volume increases and improved consumer flour volume compared to weak consumer flour volume in the third quarter last year. Third quarter segment earnings increased 24% to $8.3 million, compared with $6.7 million a year ago. The increase in segment earnings was primarily the result of the improved volumes and the benefits from the reorganization of operations, partially offset by the unfavorable impact of a 3% decline in the average exchange rate. To a lesser extent, results also benefited from lower wheat costs. Segment earnings before unusual items for the nine-month period increased 12% to $12.2 million, compared with $10.9 million last year. Unusual items in fiscal 1994 were pre-tax charges of $21.8 million associated with the reorganization of operations. Net sales for the nine-month period increased 3% to $222.3 million, compared with $216.8 million a year ago. Venezuelan Foods third quarter net sales increased 26% to $81.0 million, compared with $64.5 million last year. The sales increase was primarily the result of increased volumes in the Company's consumer, bakery and agricultural products. Improved volumes in consumer products were primarily the result of increased demand for the Company's products and the impact of the acquisition of a corn flour business in May 1994. The higher volumes in bakery products resulted from increased market share and additional business obtained in connection with the lease of two wheat flour mills in October 1994. Higher volumes in agricultural products were primarily attributable to market share increases. Third quarter segment earnings increased 12% to $5.7 million, compared with $5.1 million last year. The segment earnings improvement resulted primarily from the increased volumes and the near-term stability from government-imposed foreign exchange controls, described below. Segment earnings for the nine- month period decreased 42% to $9.6 million, compared with $16.5 million last year, primarily from the impact of a significant devaluation of the Venezuelan currency that occurred in the first quarter and early in the second quarter of fiscal 1995, and the Company's use of the U.S. dollar as the functional currency for translation purposes. These unfavorable impacts were partially offset by improved volumes and the favorable impact of the subsequent foreign exchange controls. Net sales for the nine-month period increased 16% to $227.9 million, compared with $196.4 million last year, primarily on higher consumer products and animal feed volumes. In June 1994, the Venezuelan government implemented price controls, which affect most of the Venezuelan operations' products, and a foreign exchange control system. The government has allowed reasonable price increases for most of the Company's products. In connection with the implementation of exchange and price controls, the government has announced that sufficient U.S. dollars will be made available at the controlled exchange rate for basic food imports, which include the Company's raw material needs. The government has allowed the exchange of Venezuelan bolivars to U.S. dollars for payments by the Company for raw material imports. However, the Company has continued to experience delays in obtaining U.S. dollars for transactions that occurred prior to the implementation of exchange controls, including dollars required for the repayment of U.S. dollar- denominated obligations of the Company's Venezuelan operations. As of November 30, 1994, net monetary assets totaled the U.S.-dollar equivalent of $9 million. The government has currently established the exchange rate at 170 bolivars per dollar. The Venezuelan government has continued to state that exchange controls are temporary. However, the Company is unable to determine the extent and timing of any changes in the exchange controls and the potential impact on the exchange rate. If the bolivar were to decline in value versus the U.S. dollar and the Company continued to be in a net monetary asset position, there would be foreign exchange losses, the amount of which will depend upon the size of the net monetary asset position and magnitude of the currency devaluation. In addition, the Company may be unable to immediately increase selling prices to maintain current gross profit margins. At the present time, strategies for the management of currency risks are limited to working capital management techniques and product pricing strategies. The Venezuelan government announced that companies intending to repatriate dividends in U.S. dollars must obtain government approval. It is unclear whether there will be limits imposed on such dividend repatriations. Non-operating Expense Third quarter net interest expense increased to $3.0 million from $2.1 million a year ago primarily as a result of higher interest rates in the United States and Canada. The increase in interest expense was partially offset by increased interest income in Venezuela from the temporary build- up of local currency deposits which resulted from delays in obtaining U.S. dollars to settle certain U.S. dollar-denominated obligations as described above. For the nine-month period, interest expense increased to $8.8 million from $7.9 million a year ago. In addition to the factors noted above for the third quarter, the Company's interest expense had declined in the second quarter of fiscal 1995 from temporarily reduced debt levels in the United States as a result of the proceeds from the divestiture of the Frozen Specialty Foods business. Debt levels increased near the end of the second quarter of fiscal 1995 with the acquisition of the specialty foodservice distribution business of Leprino Foods Company. In last year's third quarter, Corporate included a foreign exchange gain on short-term investments in Venezuela of $.6 million. Income Taxes The effective tax rate increased to 40% in the third quarter of fiscal 1995 compared with 38.6% last year as a result of higher foreign taxes. For the nine-month periods, the effective tax rate was 23.2% in fiscal 1995 and 42.9% in fiscal 1994. The low tax rate in fiscal 1995 resulted from the low tax rate on the Frozen Specialty Foods transaction. Excluding unusual items and losses from unconsolidated affiliates, the effective tax rates were 40.0% and 38.6% in fiscal 1995 and 1994, respectively. The increase was the result of higher foreign taxes. Financial Condition: The Company's balance sheet at November 30, 1994 reflected the acquisition of the specialty foodservice distribution business of Leprino Foods Company and the divestitures of the Company's Frozen Specialty Foods and Meats businesses. The increase in inventories and accounts payable was primarily due to the acquisition, seasonal requirements in Canada and seasonal grain purchases in Venezuela, partially offset by the effect of the divestitures. The decreases in property, plant, and equipment and other noncurrent assets and the increase in goodwill were the result of the impact of the acquisition and divestitures. The increase in other current liabilities was primarily the result of the charge for the integration of businesses (see Note 4) and taxes associated with the sale of the Frozen Specialty Foods business. As of November 30, 1994, the Company's debt-to-total-capitalization ratio had declined to 47%, as compared to 50% at February 28, 1994. The Company's debt declined, as proceeds from the Frozen Specialty Foods disposition exceeded the cost of the acquisition of the specialty foodservice distribution business of Leprino Foods Company. Certain repurchases of outstanding stock were made in the first quarter of fiscal 1995 under the previously announced share repurchase program. The Company expects that future share repurchases under this program, if any, will be funded by borrowings or proceeds from any divestitures. In Canada, the Company minimizes risks associated with wheat market price fluctuations by hedging its wheat and flour inventories, open wheat purchase contracts and open flour sales contracts with wheat futures contracts. See Note 8 for further discussion. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11. Computation of Earnings Per Share. 12. Computation of Ratio of Earnings to Fixed Charges. 27. Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended November 30, 1994. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERNATIONAL MULTIFOODS CORPORATION Date: January 12, 1995 By /s/Duncan H. Cocroft Duncan H. Cocroft Vice President - Finance and Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer) EXHIBIT INDEX 11. Computation of Earnings Per Share. 12. Computation of Ratio of Earnings to Fixed Charges. 27. Financial Data Schedule. EX-11 2 3RD QTR EXHIBIT 11 Exhibit 11 INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Schedule of Computation of Earnings per Share (unaudited) (in thousands, except per share amounts) THREE MONTHS ENDED NINE MONTHS ENDED Nov. 30, Nov. 30, Nov. 30, Nov. 30, 1994 1993 1994 1993 Average shares of common stock outstanding 17,924 18,830 17,979 19,116 Common stock equivalents 7 103 15 138 Total common stock and equivalents assuming full dilution 17,931 18,933 17,994 19,254 Net earnings (loss) $10,914 $12,453 $45,311 $(8,335) Less dividends on redeemable preferred stock (42) (44) (126) (132) Net earnings (loss) applicable to common stock $10,872 $12,409 $45,185 $(8,467) Earnings (loss) per share of common stock: Primary $ .61 $ .66 $ 2.51 $ (.44) Fully diluted $ .61 $ .66 $ 2.51 $ (.44) Primary earnings per share has been computed by dividing net earnings, after deduction of preferred stock dividends, by the weighted average number of shares of common stock outstanding during the period. Common stock options and other common stock equivalents have not entered into the primary earnings per share computations since their effect is not significant. Fully diluted earnings per share has been computed assuming issuance of all shares for stock options deemed to be common stock equivalents, using the treasury stock method. EX-12 3 3RD QTR EXHIBIT 12 Exhibit 12 INTERNATIONAL MULTIFOODS CORPORATION AND SUBSIDIARIES Schedule of Computation of Ratio of Earnings to Fixed Charges (unaudited) (dollars in thousands) THREE MONTHS ENDED NINE MONTHS ENDED Nov. 30, Nov. 30, Nov. 30, Nov. 30, 1994 1993 1994 1993 Earnings (loss) before income taxes (1) $18,190 $20,282 $59,005 $(2,409) Plus: Fixed charges (2) 6,655 5,545 17,733 16,971 Less: Capitalized interest (87) (420) (256) (593) Earnings available to cover fixed charges (3) $24,758 $25,407 $76,482 $13,969 Ratio of earnings to fixed charges (3) 3.72 4.58 4.31 .82 (1) Losses before income taxes have been adjusted to exclude losses from less-than-fifty-percent-owned subsidiaries. (2) Fixed charges consisted of the following: THREE MONTHS ENDED NINE MONTHS ENDED Nov. 30, Nov. 30, Nov. 30, Nov. 30, 1994 1993 1994 1993 Interest expense, gross $4,293 $3,227 $10,937 $ 9,845 Rentals (1/3) 2,362 2,318 6,796 7,126 Total fixed charges $6,655 $5,545 $17,733 $16,971 (3) For the nine months ended November 30, 1993, earnings were inadequate to cover fixed charges. The resulting deficiency was $3,002 for the nine- month period. The deficiency was the result of unusual items. Exclusive of unusual items, the ratio of earnings to fixed charges would have been 3.62 for the nine months ended November 30, 1993. EX-27 4 3RD QTR EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEET, STATEMENTS OF OPERATIONS AND CASH FLOWS AND ACCOMPANYING NOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES. 1,000 9-MOS FEB-28-1995 NOV-30-1994 8,848 0 154,594 5,825 263,146 498,463 333,489 104,785 879,098 359,398 178,653 2,184 3,616 0 280,241 879,098 1,771,243 1,771,243 1,477,156 1,477,156 106,661 2,351 10,681 59,005 13,694 45,311 0 0 0 45,311 2.51 2.51
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